Landonline faces cost blowout

By ADAM GIFFORD

Stage two of Land Information New Zealand's $145.7 million Landonline project finally starts a pilot launch in Christchurch, with the department conceding it will cost more to run than previously thought.

In his annual report, Linz chief executive Russ Ballard said that in the next budget round he would be seeking $3 million to $4 million more a year in baseline funding.

"The resource levels forecast in 1997 to operate under Landonline are inadequate for a number of reasons - assumptions on costs and savings have changed over time as contracts have been negotiated and the actual application produced."

Parliament's primary production committee, which oversees LINZ's estimates, said the cost of running Landonline was expected to be higher because external customers were taking up the system more slowly than assumed in the forecasts.

"If so, Linz will require more staff than provided in its baseline until the actual uptake rate converges with the rate in the business case," the select committee said.

Its chairman, David Carter, said that while the committee accepted the department's explanations this time, Linz would face tough questions in the next estimates round.

"Any time there is contact between Linz and Government, it has been to say there have been escalating costs for various reasons. That starts to ring alarm bells."

Stage one of Landonline moved Linz staff from paper to electronic processing of tiles and plans.

External users can access the system through Citrix thin client technology to search for records and order documents, but they have to wait for stage two before they can lodge transactions electronically.

Conversion of survey records is not due to be finished until next September. Until then, Linz expects few surveyors to sign up.

As well as requiring the Government to increase its capital investment, the shortfall in revenue also means reductions in user charges - a big selling point for the project - will be smaller than predicted.

Ballard said Linz underestimated how long it would take staff to adapt. There were technical issues which meant Linz struggled to meet survey and titles processing times for most of the year, upsetting users.

"However by year end [June], the transaction backlogs had been considerably reduced and few complaints were being received."

Ballard said PricewaterhouseCoopers, which is writing the Landonline application, and EDS, which has the contract to convert existing land title and survey information into digital format, fell behind, creating further disruption and incurring penalty payments.

Those penalty payments were one reason for the collapse of Crown-owned mapping company Terralink, which subcontracted to EDS to convert survey data. The company was put into receivership when the Government refused to bail it out, and a consortium of New Zealand Aerial Mapping and Animation Research bought its assets.

The select committee said EDS missed key contractual dates for both survey and titles conversions, costing Linz time and money.

"For the survey conversion, damages were waived up to August 2002 because EDS took over survey conversion following Terralink's receivership," the committee said.

Since August, EDS has paid Linz $20,000 a month to cover the cost of Linz managing the project and undertaking quality assurance.

EDS said the damages waived by the department were nothing to do with the $10 million the company claimed from Terralink's liquidator.

With other creditors, it received 18c in the dollar. That covered some of the losses suffered by EDS as a result of the Terralink receivership and amounts due for services supplied by EDS.

A spokeswoman said there had been no waiver of penalties by Linz.

"The issue is about 'consequential losses' Linz might suffer directly as a result of actions by EDS causing the project to run past its contracted completion date.

"Rather than sue for these in court with the weight of proof required, legal costs, etc, Linz and EDS have reached an accommodation over consequential losses that is accepted as fair and reasonable by both parties."

Ballard said that under the confidential commercial agreement with EDS, which includes waiving some EDS damages for survey conversion delays, the Landonline project suffered no actual losses.

John Tamihere, the minister in charge of Linz, said the damages were waived to ensure the project continued smoothly.

"When we were something like 12 months out from the end of a $140 million project, I did not get into questions of unjust enrichment, I got into how you safeguard the project."

He said the Government had a level of protection because the Landonline project was financed from industry levies.

PricewaterhouseCoopers Consulting is now owned by IBM, which has incorporated it into its Business Consulting Services division. IBM New Zealand referred questions to IBM Australia, which refused to comment.

Industry sources say IBM has concerns over some of the technology and architecture decisions made in Landonline, for which Linz has always relied heavily on advice from PricewaterhouseCoopers.

Ballard has always stoutly defended the choices, but his annual report admits to problems ahead.

He said challenges included meeting customer expectations in terms of the usability of Landonline, its continuous availability, its costs and level of support.

"Demand for enhancements is expected to be high. Keeping abreast of technology upgrades in the system databases and applications as well as the security area will place pressure on both Linz's skills and financial resources."

Landonline has already struck problems with the digital certificates chosen for stage two, which caused a delay in the start of the pilot.

Though most of the Christchurch law firms taking part in the pilot said they were barred by Linz from talking to journalists, some said there had been hiccups caused by files not loading and software bugs.

"Most firms are still doing it both ways to cover all the bases," one lawyer said. "There have been problems with the application locking up when you try to run through the screens."

He said the user interface was an improvement - more intuitive and easier to get around.

In the first week of the pilot, only 17 confirmed electronic dealings were done by lawyers, most of those internally within firms.

If lawyers representing both buyers and sellers are connected to Landonline, the entire conveyancing transaction, including updating the title register, can be done without reference to Linz staff - a factor which is behind the high-security demands.

Land Information New Zealand